Cement Prices Set To Rise As States Impose New Mineral Tax: Report

To counterbalance the cost increase, cement prices in Tamil Nadu are expected to rise by Rs 8-10 per bag, according to the report

Cement companies are likely to take a gradual approach to price increases in order to avoid shocking the market

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Cement prices across several states are expected to rise as state governments may impose new mineral taxes following a Supreme Court ruling, according to a report by JM Financial. In July 2024, the Supreme Court's decision allowed states to levy taxes on mineral rights and mineral-bearing lands in addition to existing royalties. Following this, Tamil Nadu introduced the Tamil Nadu Mineral Bearing Land Tax Act, 2024, which imposes an additional Rs160 per tonne tax on limestone mining, effective from February 20, 2025. Other mineral-rich states, including Karnataka, are reportedly considering similar measures, prompting cement companies to increase prices in order to offset the higher costs.

The new tax is anticipated to have a significant impact on cement manufacturers in Tamil Nadu. As limestone is a crucial raw material in cement production, the additional tax will drive up manufacturing costs, prompting companies to consider price hikes to preserve profitability.

To counterbalance the cost increase, cement prices in Tamil Nadu are expected to rise by Rs 8-10 per bag. In recent years, cement prices in the state have faced downward pressure due to fierce market competition, as per the report.

With the new tax burden, companies may have little choice but to pass on the added cost to consumers through price hikes. Industry experts suggest that Tamil Nadu's move could set a precedent for other mineral-rich states to introduce similar taxes.

Mineral Tax

The Karnataka government is already in talks about a potential mineral tax, and other states with substantial limestone reserves may follow suit. If more states implement such levies, cement prices across India could rise more broadly in the coming months.

Cement companies are likely to take a gradual approach to price increases in order to avoid shocking the market. However, with rising input costs, the industry's pricing strategy will be a key factor to watch in the near term.

As the situation develops, analysts will closely monitor how cement manufacturers adjust their pricing strategies and how the new tax policy impacts the broader construction and real estate sectors in Tamil Nadu and beyond.